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IFS - Local government will need to accept reduced service provision unless more funding found

The Institute for Fiscal Studies paints a dire picture of local government funding, particularly in more deprived areas. This context is important for digital government teams.

Reductions in funding across local government are so severe, and councils have come under so much pressure, that citizens will either need to accept a reduction in service provision across the country in the future, or additional funding will need to be provided.

This is the view of the Institute for Fiscal Studies (IFS), which has issued a new briefing note on the current state of English council funding. Whilst the document isn’t specific to - or indeed makes no mention of - digital government at a local level, the context is important. Digital teams are likely to come under further significant pressure to not only deliver savings, but to also rethink service delivery to accommodate for both reduced funding and increased pressure.

As we have noted previously on diginomica/government, local government is a diverse beast and it needs to be analysed with the understanding that it is not one entity with standard requirements. It is made up of hundreds of organisations that are serving differing local needs. That being said, there are common themes: financial pressures, a lack of skills, a history of outsourcing and shared services, as well as a relative immaturity in cloud adoption.

As with any sectors, there are pockets of excellence, and there are those that need support in adopting new digital tools and shifting their operating model. And whilst the future looks bleak, there is an argument that crisis creates an opportunity to force through a different way of doing things.

The findings

IFS states that we are in the midst of major changes to local government funding - both its level and its system. It brings together the following analyse:

On average, local government spending on services has fallen by 21% in real terms since 2009-10. However, cuts have not been equally distributed across the country, and have been larger in more deprived than more affluent areas. Spending per person in the most deprived fifth of councils has fallen from 1.52 times to 1.25 times the level in the least deprived fifth between 2009-10 and 2017-18.

Cuts have also varied between services. Councils have prioritised services such as adult social care (down 5%) and children’s social care (up 10%), whereas spending on children’s and youth centres is down more than 60%. Planning and development and housing is down more than 50%, whilst highways & transport and cultural and leisure services are down more than 40%.

Revenues from council tax and business rates - the two primary sources of funding for councils going forward - are “highly unlikely” to keep pace with rising demands and costs for public services. For example, IFS states, even if council tax were to increase by 4.7% a year (which is the average increase this year), every year, adult social care could account for more than half of revenues from these taxes by the mid 2030s, even without increasing service provision. Other services will be left with scant resources as a result.

The report notes that this means that we will “have to accept lower levels of service provision or that councils will have to be provided with additional funding”. Another viewpoint could be that local government needs to radically rethink how its organised and how it delivers services. One place to start could be taking a look at how the likes of LocalGovDigital is promoting a platform approach to service design.

Commenting on IFS’s findings, Chair of the Local Government Association’s Resources Board, Cllr Richard Watts, said:

With councils in England facing an overall funding gap of £8 billion by 2025, the IFS is right to reinforce our warning that unsustainable funding cuts and demand pressures are pushing local services to the brink.

Pressures continue to grow in children’s services, adult social care, and efforts to tackle homelessness. This is leaving increasingly less money for councils to fund other vital services, such as the maintenance of parks, certain bus services, cultural activities and council tax support for those in financial difficulty to try and plug growing funding gaps.

Huge uncertainty also remains about how local services will be paid for next year and beyond. The Spending Review will therefore be make or break for vital local services and securing the financial sustainability of councils must be the top priority. If the Government fails to adequately fund local government in the Spending Review then there is a real risk to the future financial viability of some services and councils.

Fully funding councils is the only way to ensure councils can continue to provide all of the valued local services which make such a positive difference to communities and people’s lives.

My take

IFS concludes its analysis by stating that big choices loom for local government - both on the level of funding and how it is raised and distributed. It adds that we “cannot continue to muddle on as we are” and that reform of the local government finance system is not just a technical issue, but will have “profound implications for the hope of country England is”.

Whilst funding is a critical element of the delivery of services, we at diginomica/government would also argue that this needs to be considered through a lens of thinking differently about the delivery of services.